As previously covered by Fueled, the recent passing of the CROWDFUND Act paved a new - and, more importantly, legal - path for entrepreneurs and startups to raise capital for their businesses. The general public now has the ability to directly invest in the ideas of entrepreneurs without complex regulation attached to the process. If you have ever visited Indiegogo, a global funding platform, you understand exactly what this means; likewise, you understand exactly how fun it is going through pages of eclectic business concepts and make early stage investments in the ones that catch your eye.
Established crowdfunding platforms are certainly considering the CROWDFUND Act not only an occasion for applause, but a way to guide more and more entrepreneurs who seek this method of funding. In moving forward, there continues to persist the question of how to tweak one’s crowdfunding “swag” in order to attract a larger support base and, through that, a proportionate amount of funding from fans.
Heeding professional crowdfunding insight is the most opportune way to figure out some of the essential steps toward making your brand the glittery diamond in a sack of coal.
Tell a Good Story
Alex Budak, co-founder of Startsomegood, is gung-ho about the importance of telling a good story. “The first thing is to remember that fundraising, really, is storytelling. It's so important to be able to craft a compelling narrative around what you're doing, why it's important, and to inspire others to join you in your journey.” Creating a sense of purpose is paramount to building incentives. According to Tod Whipple, founder of Startup Addict, a good entrepreneur should be prepared to go the extra mile and “include pictures, videos, and supplemental documents.”
Credibility and trust are two of the most essential factors that determine the success of crowdfunding. According to Sam Mar of Cofolio, investing locally is the key to building both. “The closer investors are, the more at ease they feel with the business owner because there is an inherent sense of accountability built into any transaction that takes place. In many cases, investors enjoy being able to ‘drop-in’ during business hours and see how the business is running. This is a similar principle of community accountability that is applied in micro-financing.”
Whipple also suggests being “as open and transparent as possible. Funders need to believe you have the business savvy and startup chops to pull your venture off, especially as crowdfunding is becoming more equity-based and not just rewards-based.”
Give Rewards, Rewards, Rewards
Crowdfunding success is, without question, contingent upon the kind of reward system entrepreneurs put into place. Whipple offers perhaps the most comprehensive breakdown of rewards and the fruits they have the potential to produce. “If you expect to get multiple investors and achieve 100% funding in a 30, 60,or 90 day timeline, then unique, amazing, and even wacky rewards are the way to go,” he said. “A funder must get something in return of unique value other than just a warm tingling feeling in his or her heart for just funding your startup.” More specifically, he added, “A great example of unique rewards are in short film projects where a startup will name a character after a real funder on a higher priced investment tier, such as 100 dollars. The sweet spot on Startup Addict has been 10 and 25 dollar funding increments. But you can land bigger money for associate producer or executive producer credits. Creative and unique are the name of the game to getting funded.”
Lest We Forget: Social Networking
The fact that so many social networking mediums are free and grant entrepreneurs easy connection to their supporters has been naturally conducive to crowdfunding growth. Sally Outlaw, co-founder of Peerbackers, has been in the business long enough to know that effective social networking - with a tinge of tangy creativity - is the key to project promotion. “You have to regularly promote your link via Facebook, Twitter, and email. Going beyond your own immediate network can be key to success - reaching out to bloggers and TV reporters that cover your industry, getting those who will benefit from the success of your project (vendors, potential employees, customers, etc.) to also promote your link - can make a big impact on funding raised.” Outlaw justifies her claim with a golden statistical seal that harkens back to Whipple’s insistence on short films. “Projects with video raise 125% more money than projects without, so having the core marketing elements of your project be creative and dynamic help as well.”
Many confidently assert that the legal recognition of crowdfunding is perhaps the best thing to happen within the last 20 years for entrepreneurship and the immense diversity of innovation it encompasses - an assertion built purely upon the simple notion that projects may now be funded by the general public, with no large endowments or exclusively governmental financial backing needed. But it seems that we are far too early in the crowdfunding game to make any solid or uniquely positive remarks regarding just how many success stories it will produce in the years to come. That being said, startups in collaboration with their crowdfunding platform agents like Peerbackers or Rockethub, for instance, should be especially able to meet the demands that come with suddenly having plenty of investors if, in fact, an idea is good. But the world of investment can be quite unpredictable. What is your take on this new form of easily accessible early investment for the masses?